Place designated as the venue of arbitration would be the 'Seat' under Arbitration and Conciliation Act: Bombay High Court

Place designated as the venue of arbitration would be the 'Seat' under Arbitration and Conciliation Act: Bombay High Court

The bench said that the respondent could not have any unilateral authority to appoint an Arbitral Tribunal

The Bombay High Court has reiterated that a place designated as the 'venue' of the arbitration proceedings would necessarily be the 'seat' under the Arbitration and Conciliation Act, 1996.

The single-judge bench of Justice G.S. Kulkarni held that as part of the agreement wherein the parties agreed upon the venue of the arbitration proceedings, the designated place becomes the place of arbitration.

After disputes between the applicant Priya Malay Sheth and the respondent VLCC Health Care Ltd, the applicant invoked the arbitration clause. The applicant filed an application under the Arbitration Act before the high court for the appointment of an arbitrator.

The respondent (VLCC) submitted before the court that as per the arbitration agreement, the arbitral proceedings were to be held in Delhi. Therefore, the Bombay High Court did not have the jurisdiction to entertain the application.

The applicant (Sheth) averred that as per the first clause of the arbitration agreement, if the parties failed to resolve the disputes by mutual consent, then either party may give notice in writing of its intention to refer the dispute to arbitration and that a Sole Arbitrator would then be appointed by the respondent VLCC.

The applicant added that the second Clause provided that in such an event, the arbitration would be conducted in accordance with the International Chamber of Commerce Rules and that the venue of the arbitration would be in Delhi.

The applicant contended that since the applicant had invoked the arbitration agreement by issuing a notice to the respondent and as there was a failure on the part of the respondent to agree to the appointment of an arbitrator, the second Clause was rendered inconsequential.

Sheth added that under the first Clause, the respondent had been conferred a unilateral authority to appoint an Arbitral Tribunal. Hence, under the settled principle of law laid down by the Supreme Court, a party to a contract could not have the authority to unilaterally appoint an Arbitral Tribunal.

The applicant further averred that since the respondent failed to act on the arbitration agreement, the respondent could not seek recourse to the second Clause. Thus, the Bombay High Court could exercise the jurisdiction under Act and appoint an Arbitral Tribunal.

However, the court observed that in an earlier case, the Supreme Court had held that a party interested in the outcome of the arbitral proceedings did not have any unilateral power to appoint an arbitrator. It added that this would not invalidate the arbitration agreement and the Supreme Court had established an independent arbitrator.

The court noted that the first Clause by conferring authority on the respondent to appoint an arbitrator unilaterally was bad in law. It said the respondent could not have any unilateral authority to appoint an Arbitral Tribunal.

The court added that under the second Clause, the parties had agreed to the way the arbitral proceedings would be conducted, i.e., by following the ICC Rules. It stressed that under the second Clause, Delhi was decided to be the venue of the arbitration.

Justice Kulkarni dismissed the applicant's contention that the first and second Clause of the arbitration agreement were interlinked. Therefore, it did not have the jurisdiction to entertain the application.